Bertelsmann Reports Improved Results

Random House corporate parent Bertelsmann reported improved quarterly operating profit performance and remains optimistic about the remainder of the year. From their press release:

Bertelsmann, the international media company, today reported strong first quarter fiscal 2008 results. First-quarter operating profits (Operating EBIT) were up by 9.6 percent compared with the previous year. Operating EBIT for the period under review amounted to €217 million (Q1/2007: €198 million). These developments were driven by the continuing positive performance of the major core businesses. Group net income improved to €35 million (Q1/2007: €-70 million). Meanwhile, revenues declined by 3.9 percent year-over-year to €4.2 billion. Adjusted for portfolio changes and foreign-exchange effects, revenue decreased 1.7 percent year-over-year. The revenue performance reflected negative foreign-exchange effects due to the Euro’s strength relative to the U.S. dollar and British pound. Revenues were also impacted by declines in sales of physical recordings and revenues at Direct Group in North America. Adjusted for portfolio changes and foreign-exchange effects, Bertelsmann expects a moderate rise in revenues for 2008. The Company expects operating results for 2008 will be on par or slightly above the high levels seen in 2007. Group net income will be well above 2007 due to fewer special items and lower interest expenditure.

The company announced earlier this month that they have hired Morgan Stanley to sell the Direct Business.

Bertelsmann investor presentation reflecting the full year results from all divisions. Here. (RH revenue of $1.8bill and op income $172mm for 2007).

Harpercollins Reports Static Results. Releases Authonomy.com

Harpercollins produced revenues of $302mm in their 3rd quarter ended March 31st which compared favorably with the same period last year ($291mm). For the nine months, revenues continue to lag the performance in 2007. 2008 YTD revenues of $1,038mm are marginally lower by $14mm.

Operating income as described in NewsCorp's press release was as follows:

HarperCollins reported third quarter operating income of $29 million, in-line with the same period a year ago. The current quarter included strong sales of Naughty Neighbor by Janet Evanovich, Stop Whining, Start Living by Dr. Laura Schlessinger, Lady Killer by Lisa Scottoline, Fancy Nancy, Bonjour Butterfly by Jane O.Connor and The Chronicles of Narnia: Prince Caspian by C.S. Lewis. During the quarter, HarperCollins had 54 books on The New York Times bestseller list, including 4 titles that reached the #1 spot.

Again, no mention of the performance of Harpercollins on the earnings call.

On another note, Harpercollins UK announced last year that they were establishing a site for authors which they named authonomy. The site is now in private beta and is covered by fellow traveller James Bridle at Booktwo.org.

The real challenge, of course, is to persuade wannabe writers to post their work at all - in my own personal experience, unpublished writers are terrified of their work being ’stolen’, enough to be suspicious of publishers themselves, let alone your average web surfer. The Front List, a previous attempt at a “YouTube for books”/”crowdsourcing the slushfile”-type site, solved this by hiding everything from non-members; one approach certainly, but not one likely to bring in the crowds.

James is also an author.

Amazon The CD Manufacturer

An article in Information Week (I'm more likely to read Cosmo) bubbled up in my alerts this week about Amazon working with Sony BMG and EMI to bring 'out of print' recordings back into circulation. From the article,

Amazon, Sony BMG, and EMI Music said that they will make hundreds of out-of-print albums available on Amazon's Web site through CreateSpace's Disc on demand service. Some of the titles that have been restored to availability include Hatari Soundtrack by Henry Mancini, Earthquake Weather by Joe Strummer, Motorcade of Generosity by Cake, Telepathy by Bill Stewart, Foreign Intrigue by Tony Williams, and Carryin' On by Grant Green. A few of the recordings being made available through Disc on Demand are new releases rather than reissues, such as the upcoming title in KCRW's Sounds Eclectic series. The arrival of brand-name, major-label content should enhance the credibility of CreateSpace's media on-demand service, which has yet to shake of the stigma associated with self-publishing. CreateSpace was born last August. It used to be called CustomFlix, which Amazon acquired in July 2005.

Just another example of how Amazon is willing to move up and down the supply chain. Interestingly, the author of the article does note the controversy around the BookSurge situation but perhaps the more interesting point is about how Amazon will use their own demand analysis to determine which recordings to produce. Perhaps not so obvious is the impact on all the Amazon affiliates who have businesses supplying rare and hard to find recordings. Are they doomed?

Nielsen BookData NZ Sets Milestone

Good news from New Zealand, all nine New Zealand booksellers voted in Nielsen BookData's NZ Booksellers Choice Award for book of the year. As they note, "For the first time in the history of the Nielsen BookData New Zealand Booksellers' Choice Award, several titles received precisely the same number of nominations, making it impossible to create a shortlist of four titles." The seeming statistical impossibility was left unexplained by the data aggregator/market researcher. As a solution, the company decided to create a "long short list" of possible winners. The list amounts to eight titles and the sheer enormity of the task required of Booksellers to make the actual selection is likely to induce rioting.

In fairness, here is the list:

- A Nest of singing Birds: One Hundred Years of the New Zealand School Journal by Gregory O'Brien, published by Learning Media
- Bill Hammond: Jingle Jangle Morning by Jennifer Hay, published by the Christchurch Art Gallery
- Edwin and Matilda: An Unlikely Love Story by Laurence Fearnley, published by Penguin Books NZ Ltd
- Mau Moko: The World of Maori Moko by Ngahuia Te Awekotuku, published by Penguin Books NZ Ltd
- New New Zealand Houses by Patrick Reynolds and John Walsh, published by Random House New Zealand Ltd
- New Zealand's Wilderness Heritage by Les Molloy and Craig Potton, published by Craig Potton Publishing
- Ribbons of Grace by Maxine Alterio, published by Penguin Books NZ Ltd
- Soundtrack: 118 Great New Zealand Albums by Grant Smithies, published by Craig Potton Publishing
- The Road to Castle Hill by Christine Fernyhough with Louise Callan, published by Random House New Zealand Ltd

(At least they are books and not rulers - which is an inside joke that only my past colleagues will get).

Shatzkin Speeches Posted

Mike Shatzkin informs me he has just posted on his website four talks delivered this year (three of them somewhat belatedly). Mike noted, "There is definitely a good deal of repetition here, but there is also a distinct slant to each piece. For those of you who are not gluttons for punishment, I'd suggest the one, delivered on Wednesday, May 7, 2008 in Copenhagen. The one titled The End of General Trade Publishing Houses is a completely rewritten version of an earlier version some of you may have read. The other two are described sufficiently below."

May 7, 2008 to Danish publishers and booksellers in Copenhagen on the Future for Publishers and Booksellers: Here

April 16, 2008 to UK publishers at London Book Fair, summarizing US state of affairs reporting on "The State of Digitization in the US": Here

March 10, 2008, "Publishing in the Digital Age" panel participant remarks at Book Business Conference and Expo: Here

January 22, 2008, rewritten reprise of "The End of General Trade Publishing Houses", to Random House's "Digital Day": Here

Barnes & Noble Sells Magazine Subscriptions

Didn't Prodigy do this once? No matter, B&N announced yesterday that they are offering magazine subscriptions and will offer a digital service that enables users to buy old single copy editions. B&N is partnering with Zinio to offer the service which is the same service B&N has used to offer digital book content for preview on the B&N website. From their press release:

BN.com will sell subscriptions to over 1,000 magazine titles, available in both digital and print formats, at prices up to ninety percent off newsstand cover
prices. Digital subscriptions will be available within minutes of purchase for viewing on desktops and laptops. In addition, more than 12,000 back issues of hundreds of magazine titles will be available digitally for purchase as single copies.

A digital Cosmo (first one I saw, not one of my usual reading sources) is on sale on Zinio's site for $12.00 and on the B&N.com site for $12.00 or $10.80 with a membership card. So, some advantage at B&N. Selling magazines is a natural combination made especially clear given the amount of store space given to magazines in a typical B&N superstore. One wonders why this has taken so long. B&N is betting on the electronic delivery as the future play here rather than the print subscriptions. Print is a logistics nightmare where margins are razor thin which is why none of the big book web retailers have pushed print magazine subscriptions in the past. (Admittedly, fulfillment could have been done by third parties but it is still the B&N brand that goes on the package).

B&N will allow users to use the same Zinio "see inside" feature with the magazine content (probably not Playboy since they say only 'certain' magazines). Marie Toulantis, CEO of B&N noted the following:

Our magazine offering gives our customers the ultimate flexibility to consume their favorite magazines both digitally and/or in the more traditional print form via a subscription. By growing our relationship with Zinio, and introducing a partnership with M2 Media Group, we will be the only retailer to offer both options in an integrated shopping experience.

The Zinio relationship may be symptomatic of a larger strategic play that B&N may be engaged in that is, the evolution to the digital superstore. They will have watched the morphing of Newsstand.com with some concern. Under the LibreDigital brand, this company is in the process of expanding their digital delivery and content management tools to publishers and have notable deals with Harpercollins and Harlequin. B&N may be slightly aggrieved that this seller of newspapers and magazines has now inserted themselves into the publishing supply chain where B&N believes they should have reign. Adopting digital magazine distribution is only a skirmish in what may be a protracted battle for supremacy in the digital content supply chain.

Transition: Print to Online

Many publishers (myself included) have made the transition from print orientation to web and seen their business and not least their revenue model completely transform. I've refered to this as the 'valley of death' which is what the top line can look like as you make this transition and others have referred to it as "trading dollars for dimes". Industry luminaries such as Tim O'Reilly have noted some fundamental problems in trading subscription and print based ad models for web only ad models: Basically the numbers can fail to add up. (Read the article and follow some of the links).

There are some success stories and there are likely to be more as publishers willingly and generally otherwise, look to the web for revenue growth. The NYTimes discusses how magazine publisher International Data Group which is the biggest publisher of technology magazines has successfully made this transition. From the article:

Advertisers and readers of high-tech publications have moved online more swiftly than other audiences, so I.D.G. may offer a glimpse of the future of publishing. Yet the transition at I.D.G. came only after years of investment, upheaval and changes in its practice of journalism. “The excellent thing, and good news, for publishers is that there is life after print — in fact, a better life after print,” said Patrick J. McGovern, the founder and chairman of I.D.G.

The article goes on to note that InfoWorld is now generating ad revenue of $1.6mm per month with an operating margin of 37% whereas the combination print and web product of a year ago was a break-even operation. Since their market is technology they have some advantage over other types of magazines; however, their navigation of this transition is instructive and predictive of the manner in which publishers will ultimately become successful.

In IDG's case they have remained faithful to the mission of providing content their core market wants, aggressively managing the performance of their titles and shutting down those that don't perform and they have combined staff into cohesive and focused groups. Companies that make this transition early and successfully will establish difficult to surmount positions relative to their competitors; thus it becomes harder for the second, third and fourth players to garner the ad revenue and secure transaction revenues and fees necessary to become successful.